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OpenMarket: Telecommunications

Today, the Federal Communications Commission (FCC), on a three-to-two vote, found that AT&T violated federal regulations by failing to disclose that it was throttling certain wireless customers on an “unlimited” data plan. The FCC claims AT&T owes a $100 million fine. This announcement follows a lawsuit filed in October 2014 by another federal agency, the Federal Trade Commission (FTC), arguing that AT&T violated federal consumer protection law by throttling its unlimited data plan customers. AT&T has pledged to take both agencies to court to defend itself against these allegations.

By way of background, for many years, AT&T and many other wireless providers offered data plans—used for Internet browsing, email, video, and so forth—on an all-you-can eat, unlimited basis. These plans let customers transmit and receive as much information as they wish, without facing overage charges for downloading too much data.

However, in mid-2010, AT&T stopped offering unlimited data plans to new customers. For existing customers on an unlimited plan, AT&T allowed them to stay “grandfathered” on their old plans. Then, in 2011, AT&T began throttling the throughput—commonly known as “speed”—of its highest users of unlimited data plans. This throttling didn’t stop any customers from using as much data as they wanted, but it did substantially degrade a fraction of AT&T customers’ connectivity.

Had AT&T not told anybody about this throttling, it would clearly run afoul the FCC’s transparency rule, which was issued in 2010 and upheld on judicial review by the Court of Appeals for the D.C. Circuit in 2014.

Yet AT&T did disclose its behavior to customers and the public through various means:

AT&T issued a press release in 2011, which over 2,000 news outlets covered;

AT&T included an insert explaining its new policy in the bills of unlimited data customers;

AT&T posted an informational page on its website explaining the throttling, and linked to this page on the AT&T Wireless homepage;

AT&T modified its service contract in August 2012 to mention the potential throttling of heavy users;

AT&T sent text messages to heavy unlimited data users in the months before it began throttling to warn such users that they would face throttling in future months; and

AT&T sent text messages to heavy unlimited data users after it began throttling, warning such users that their usage was approaching the threshold where throttling would begin and explaining how to change to a different plan to avoid throttling

A majority FCC, however, found that none of these disclosures were enough, because some customers might have missed all of them and simply assumed that “unlimited” meant not only unlimited usage, but unlimited throughput, too. But as dissenting FCC Commissioner Ajit Pai argued in his dissent, unlimited data and unlimited speed aren’t the same—and AT&T never promised its customers they would enjoy both.

CEI responded to the news that the Comcast-Time Warner merger failed. You can read more analysis from CEI's Vice President for Policy Wayne Crews here.

"The deck was stacked against this deal from the beginning: Comcast and Time Warner Cable had to seek permission to merge from not only the Department of Justice, but also the Federal Communications Commission. While the DOJ must win in court before it can block an acquisition, the FCC has unilateral power to send a transaction into regulatory limbo for years before the merging parties get a chance to be heard by an independent federal judge. This process turns the rule of law on its head, and only Congress can fix it."

-- Ryan Radia, Associate Director of Technology Studies

“The collapse of the Comcast-Time Warner merger merely because of the interference of government, not because of actual market rejection, illustrates the overwhelming power of the modern state to undermine the advance of communications technologies and services. These bureaucrats have decided on our behalf to award other communications industry companies a government-granted reprieve from the pressures of competition.”

The separation of powers doctrine demands that Congress not tolerate unelected federal agencies going it alone and making binding law.

The Federal Communications Commission (FCC), on a party line vote, has elected to impose so-called net neutrality regulation via a reclassification of the formerly lightly regulated Internet under Title II of the Communications Act.

Somehow, we suddenly need government force to protect the freedom we’ve known online, with a 332-page set of rules no one outside the agency has seen.

Thursday's Federal Communications Commission (FCC) net neutrality conceit should trigger the Congress’ replacement of this rogue agency with something that recognize boundaries, something attuned to the future and reality.

Airwave scarcity and public interest concerns are the causes that long presumably justified telecommunications regulation. But thanks to Thursday's FCC vote, the FCC bureaucracy itself undermined those values with a new regime that will inhibit new infrastructure development and ultimately freedom of speech itself.

Under utility-style micromanagement of the Internet, which is what Title II would allow, the agency will be reenergized as a magnet for political cronyism. The “bad guys” or villainous “gatekeepers” according to net neutrality partisans are the Internet service providers.

Over the decades I’ve spent in this Heart of Darkness (a.k.a., the bowels of American politics), I’ve learned two lessons that have encouraged the steady politicization of the American economy:

When the right time comes, I’ll take a principled stand (sadly, too often, once you’re no longer in office); and

Of course, we know the “right” answer is often to liberalize current rules, but that would be politically naïve, so our goal should be to avert even worse rules (but, of course, sacrificing principle rarely assuages those favoring more government control).

And both lessons seem to have been forgotten in the Republican rush to avert the threatened action by FCC Chairman Tom Wheeler to transform the Internet into a federally regulated utility. Senator Thune, Representative Upton, and Representative Walden have proposed a “compromise” bill that would strip the FCC of its purported authority to reinterpret the Communications Act to consider the Internet as a “public” utility.

Unfortunately, their language concedes perhaps the most dangerous part of such a reclassification: removing the freedom of network owners to price their services. Well, actually not quite: the Republicans would remove providers’ ability to price in ways that some view as “discriminatory.” They explicitly mention pricing policies that might result in “throttling” (like congestion-managed toll lanes?), unreasonable “network management” (as decided by whom?), and “paid prioritization” (like that used for just-in-time transportation services by most transport companies?).

But proponents argue if FCC is left alone, its rules might even be worse. And, indeed, they probably will be—but FCC action would be administrative, reversible by a future administration or via inevitable legal challenge. If Congress—led by erstwhile opponents of net neutrality—accedes to forcing the Internet into quasi-utility status, the losses could be permanent.

Those contemplating this action should reflect on the consequences of similar regulation on an earlier network—the railroads. This was America’s first national network, knitting together then small town and rural America into the national economy. Railroads dramatically lowered transportation costs—changing the economy and resulting in growth in some regions, contraction in others.